Three Lessons in Imagination for Retail Banks

Retail banking is a tough environment for anybody who wants to build a great brand. Products are largely undifferentiated. Customers could at best be described as apathetic. Call centres are widely reviled. And branches are either shabby relics or sleek-yet-uninspiring visions of glass and vinyl...

Retail banking is a tough environment for anybody who wants to build a great brand. Products are largely undifferentiated. Customers could at best be described as apathetic. Call centres are widely reviled. And branches are either shabby relics or sleek-yet-uninspiring visions of glass and vinyl. A 2012 Which? survey revealed that only 1 in 10 people in the UK trust bankers, marginally fewer than builders and civil servants.

It's unsurprising that the retail banking industry has responded through a renewed focus on getting the basics right. The recently re-launched TSB's commitment is to "safe, straightforward" banking. Lloyds bank is "passionate about doing the right thing". Nat West has pursued the (not very) lofty ambition of being "helpful" for nearly five years. Even Metro Bank - the self-styled enfant terrible of UK retail banking - only goes as far as claiming it will "offer banking focused on the customer through unparalleled levels of service and convenience".

Surely we can aim a little higher?

Retail banks aren't the only businesses to have suffered through recession. The entire retail category has had to endure its share of the pain, not to mention airlines, hotels and the car industry. But recession hasn't stopped brands in these categories finding new ways to surprise and delight us. The challenges that retail banks face are difficult but not unique. And there are plenty of examples of great brands in other industries that banks could look to for inspiration.

How should retail banks integrate their branches and digital channels to offer a better service with a lower cost base?

Burberry has embraced the online world as a part of its broader experience - a complement, not a competitor to catwalk shows and flagship stores. Burberry used digital knowhow to strengthen its reputation for creativity. Angela Ahrendts had a clear vision for the role of digital platforms "to create a company where anyone who wanted to touch the brand could have access to it", introducing the brand to its next generation of evangelists without damaging its relationship with existing admirers.

In 2012, the brand opened its flagship store in London's Regent Street as the physical embodiment of The store uses digital technology to enhance "retail theatre", including new forms of payment and inventory management, as well as "branded content" shown through digital media and live performance. The retail side of the business has also expanded through smaller format stores, concessions and boutiques dedicated exclusively to selling beauty products and fragrances. The result was an increase in retail revenues last year of 12%.

What can banks learn from Burberry's example? First, that digital platforms needn't exist purely for driving cheaper transactions. With the right combination of competence and creativity, they can deliver a premium experience and sell premium products. Second, that the online and offline experience should complement one another: customers should be able to start a transaction in one and complete in the other. Third, that branches should come in all shapes and sizes and needn't all offer the same experience: flagship branches can build a community; smaller branches can provide local support and develop sales leads; kiosks and concessions can carry out simple transactions.

How can retail banks compensate for downward pressure on interest income?

In 2007 BMW's Chief Executive, Norbert Reithofer established 'project i' in response to rising fuel prices, tightening regulation of emissions and a mounting apathy toward car ownership. The project team was handed a blank sheet of paper and initially worked outside the normal company structure to create an aspirational vision for the future of BMW.

Over the intervening years, 'project i' evolved into BMWi, a clear statement of ambition for the future of mobility. BMW has created an entire ecosystem from scratch and its services now include a network of charging points, an online marketplace for parking spaces and smartphone apps that deliver location-based mobility services. BMWi has become far more than just a car - it's a complete mobility system.

What can BMWi teach an ambitious bank? That our ability to create value is related to our willingness to look beyond our own category. BMW moved beyond thinking about owners to think about users. It stopped thinking of itself as a car company and started thinking of itself as a mobility company. Retail banks sit in the middle of the money ecosystem. They can see who we pay money to, how much and how frequently. Without much effort, they could calculate areas where we overpay and switch us seamlessly to cheaper providers. There are countless ways in which retail banks could improve the quality of our lives by identifying ways to save us time and money by playing the role of aggregator, adviser or advocate.

How can banks harness the power of social media to build trust and loyalty?

Widely applauded as the first "crowd-sourcing" business model, a pioneer in "user innovation" and a "leading web 2.0 company", Threadless describes itself simply as a "community company". Threadless engages people as collaborators, drawing on their ideas as well as their purse strings. Their members are not only customers, they are the designers, the quality control team, the advertising agency, the sales force, the models and the executive decision makers.

This relationship demands absolute transparency and trust. It was the feedback and opinion of the community that prompted Threadless' decision to turn down multi-million dollar contracts to supply Target and Urban Outfitters. For the same reason, Threadless abstains from advertising, preferring the community to grow organically through a shared interest. The community creates not only the t-shirts they buy but the company that they buy from.

Threadless' lesson is this: ask not what social media can do for you, but what you can do for society through social media. Banks and their staff used to be pillars of the community - vital to its culture as well as its economy. Bank managers could introduce entrepreneurs and encourage positive attitudes and behaviours with respect to saving, spending, investing and borrowing. Social media has amplified the opportunity for retail banks to build communities based on shared interests and financial interdependence.

These examples only begin to scratch the surface of the potential for retail banks to learn from brands outside their category. The importance of these lessons will increase as brands like John Lewis, Google and PayPal expand their retail financial services offer. The biggest impediment to building a great retail bank brand is not a lack of opportunity but a lack of imagination.

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